Let's
hear from the ground TODAY how the condition of the economy is now?

Oil & Gas
Industry

What's
the situation now

It's
been now two years since oil price started its downtrend in June 2014 after
Brent crude peak at $112 per barrel. Last year the pain has already been felt
when minority start losing jobs and bonuses were cut. Now,
the impact had been more or less wholly felt!

Basically
there are no more new projects and backlog projects are either finished or
finishing. Worst of all, there is no visibility of new projects ahead. Many
companies already suffered losses and paying out salaries each month is a big
pain. Those with debts are hit even more having to service their loans on top
of the reduced revenues and profits.

Recently,
instead of spending so much time delving into stocks, I had been busy scrolling
phone books and meeting lots of people/friends in the industry lately. I also
met up with one of my retired ex-mentor boss who sold the company to the MNC.
It is fantastic listening to him what to do during crisis.

Anyway,
you guess it; the situation is bad and worse only! Maybe the worst has yet to come!

Retrenchments
are widespread! You may have just heard from the news on TV or newspapers, but for
me, it is people whom I know. Nowadays, it is so common to receive messages
asking for assistance in job opportunity or people. Those not retrenched, some
have salaries and allowances cut significantly up to 30-40%. For those who
managed to keep their job, life isn't any easy either. They were tasked to do
multiple jobs and can be so stressed up! Of course there are also those in
better position still busy with the few existing projects recently contracted.
Then again, many cost cutting measures companywide also affect them.

Worst
ever oil crisis in history

I met many
veterans lately. They were in the industry 20, 30 or even 40 years. All
lamented that this is the worst ever crisis in their entire career. While the
1980s oil crisis is bad but there isn't as many excess vessels/rigs compared to
this one. In my opinion, the main issue is the cheap credit over the past 4-5
years. Since financing is so easy, newbuilding is severely over-supplied and
now the biggest bubble ever, much worse than the 2009 crisis.

Therefore
even if oil price is to recover, you need many years to absorb the oversupply
in these idling vessels before business prosper again.

Companies
slashing like tomorrow no longer matters

Huge
global MNCs are announcing slashing of jobs like tomorrow no longer matters - one
round after another. If you think the "Ang Mohs" are cruel and have
no feelings, at least some Ang Moh company (like mine) still compensate based
on number of years (1 year 1 month) plus notice period. Others are cutting
salaries and allowances such as handphone and other benefits. There are those who
worked 3-4 day week also to relieve the company’s burden.

Even
big local player resort to unscrupulous tactics

If you
think this is only for “Ang Moh” MNC or local SME, sorry folks you are wrong. Below
is an account I heard from the horse mouth of how a local big listed company
force employees to leave the company without having to pay them compensation.

For
instance, the boss will first give you impossible task to fulfil. If you cannot
complete as tasked (I already said impossible task), you will be shamed
frequently in front of group meetings. After hurting your emotions and if you
still stay, they will then cut your salary by high double digit percentage. The
younger ones with high levels of dignity and fewer expenses will then leave at
this stage.

For
the older ones with family who can throw away their dignity and clings on, the
company will use the following “unorthodox strategy” as their last resort. The HR
will offer the employee opportunity to work overseas. Normally it is in
location of lousier working conditions and yet with same pay without any additional
allowance for accommodation or your family. With this, you will then have no
choice but to resign.

People
showing their ugly true colors in times of crisis!

There
is saying “True colors can only be seen during crisis!” It is absolutely true. Due
to the job insecurity, you will start to see many “小人 (small people)”. It
depicts the uugliest
side of human nature. People who use to be nice will also soon become scumbags
backstabbing and bitching in order to survive. And he/she can just be your
closest colleagues during the good yester-years when time is good!

Other
industries

As
what I expected, it's definitely not just the O&G industry being
affected.

From
boss of hundreds to taxi driver

I
heard this friend who is the boss of plastic manufacturing plant in China for
last decade. Recently business is so bad that he has to shut down his plant in
China. He has since returned back to Singapore and is driving taxi now. You may
wonder why doesn’t he find a job in Singapore. This is what I asked too. The answer: "Singapore plastic industry
is even worst!" Moreover the idea of finding a salaried job sometimes
really does not bode well for someone who has been a boss for decade with tens or
even hundreds of employees under him.

Electronic
sector’s doldrums already for years

Friends
in electronic sector say it's not just now for them that the economy is bad.
It's been a sunset industry already for a long time already. Profits are
declining in the last decade, with more and more divisions closing down. They
told me at least O&G sector is booming in the last decade and we had
already earned our share of the money. In contrast, they had been suffering for
a long time already!

Retail
scene

In
retail consumption scene, I do not think it fares as well too. Tenants are
struggling with the lower sales and still have to face the relative high rents
that REITs are charging. Iconic streetwear shop 77th Street who once was so
popular among the youngsters and has 16 stores across Singapore is closing its
last store by the end of July. Founder Elim Chew said:

"Well, you know, the dream
during that time was to open up to 24 or 30 outlets all around Singapore. The
rental was then affordable. But as the rental became higher and higher and
higher, we find that we're just working for the landlord to pay off the
rental,” she said.

“When I first started, (the rental
rate) was S$9 per square foot, today it's S$35 per square foot. So, you know,
we decided that we shouldn't embark into opening more shops."

Perhaps
only the REIT investors here will think that rents can continue to go north and
they can get rich and retire easily! Or for some who think that opening a Café
means entrepreneurship!

Hospitality
sector

My
wife has close dealings with the hotel sector. Hotels are just slashing rates and
competition is fierce. Those hotels that use to be so arrogant and rigid are
now having a complete change of attitude giving all sorts of flexibility to
their clients.

Those
still doing ok – Civil Service of course!

Well,
it is certain to have many people in Singapore still faring relatively well.
For example, those in IT / Data, healthcare, education and those in basic necessity consumer
segments. But do bear in mind that during a deflated economic conditions,
normally the manufacturing sector will be the first to be hit, followed by the
consumer industry, then even the stronger sectors will be hit too! Perhaps the
most resilient sector will be civil service, but still, bonuses will also be
reduced. I remembered during the 2003 crisis, even many civil servants were forced to leave!

Apparently,
everyone now is thinking that civil service is like "safe haven". Yes
it is true in the short term. Many will be flocking there and soon there will
be a skew in talents in private and public sector! Remember in the long term,
this will be really bad because private sector is really the driving force in
an economy and public sector is merely the facilitator. Like one blogger hyom
hyom said before in one of my posts:

“….We need our best minds in the private sector to
create great companies that generate wealth and jobs. Unfortunately, our best
minds today, being the best minds as they are, will make career calculations
based on the best risk-reward ratio. The conclusion is to go join the public
sector. If they are the best minds, a low-risk high-gain awaits these scholars
in the public sector. Why join the higher-risk, yet lower-gain private sector?
Will this create the perception that winners (1st-class, 2nd-upper honours) go
to public sector and losers (2nd-class lower honours and below) go to the
private sector? I don't think this bodes well for Singapore's future because
the private sector is the wealth-creation part of the economy while the public
sector is the facilitator. I am worried about the unintended consequences of
the high starting salary of engineers. Stupid of me to say that because I am an
engineer but I am primarily saying that as a Singaporean worried about our
long-term future.”

How a
year has changed. Last year this time, people are still enjoying the bull
market and best of times. Having already quite a doomsayer then, I was totally
ignored. So sometimes it's not difficult to differentiate the ones that speak the truth and those who only speak what the majority likes to hear for the primarily benefit of themselves. Time is the critical factor.

Nonetheless,
I considered myself so blessed when people are advocating buy or spend and I
was advocating to myself, sell, cash out and invest wisely, back then.

While
I am financially and mentally prepared much earlier than most of my peers,
emotionally I am still really affected because you seriously cannot be that happy
when people you know lose their jobs or are not doing well? I know there are many wicked and selfish people who are happy
when others are not doing well, and vice versa. If that is you then please be
pathetic about yourself because one day the same situation is very likely to be
happening to you! And I am sure this kind of people will not do so well in
life either.

The
downsizing process in company just like any other companies is an expected
truth for me. What I did not expect is how fast the process is really
accelerated. This is despite my company still reporting healthy profits with a
strong balance sheet. It often takes years to be good, but months to be bad. Famous
investor Ray Dalio always warned about the asymmetric risk to the downside!

Rolf’s thoughts

To me, the worst has yet to come! Nowadays it
seems in me that I am always expecting the unexpected to happen compared to the
mainstream public.

Not that I am a paranoid, crying and fretting. I am
just being prudent. Just like in my article last year, the
whole idea is not about worrying what will happen, but instead the greater importance
is for us to: UNDERSTAND, ANTICIPATE and then we can TAKE APPROPRIATE MEASURES now.
More importantly for those smart one, you will be able to see the GAP between
the human perception and reality, hence spotting great opportunity during this
time to profit from it.

My ex-boss told me during our meeting few weeks ago that Crisis is the best time to Plan. Once you have the plan, then when the time is right, you will be able to execute your plan immediately and way ahead of the rest who did not plan.

For
the average-middle class Singaporeans, if you were to understand my philosophy
earlier and take action last year, you should be at least much better off today
(or in near future) as compared to the
rest!

In case you were one of those cursing and swearing me last year, but now
you kind of understand or agree with me, at least it's better late than never to
still take action now! If you are one of those still with very high ego and totally
hate what you are reading now, just ignore. You will be just fine because either
you were already born wealthy or you already have loads of cash on hand or you
have an iron-rice-bowl job. If not, I wish you good luck.

Even if you belong to the former group in safe hands, do remember this: your next generation may suffer, i.e. if
you already have kids or plan to have kids in future!

Quote : "My ex-boss told me during our meeting few weeks ago that Crisis is the best time to Plan. Once you have the plan, then when the time is right, you will be able to execute your plan immediately and way ahead of the rest who did not plan."

True and 100% agreed!

This is what last AFC has taught me and probably many of my generation. From AFC onwards; I only spent my last year's bonus till now and no more last year bonus. I will be cautiously watching my cash flow tightly.

Hehe... I agree with u n my ex-boss but at the expense of grasshopper! hahaha

But hor, I think that grasshopper also plan a lot wan lar... just that it never like to put on lips... bcos it is already portrayed as a grasshopper. Then again, action is also impt. so plan and action is like "mouth and teeth!" comes hand in hand.

People who go thru more ups and downs in life in general either have more wisdom or can craft wisdom more easily! And wisdom is normally a positive consequence from experiences, exposures, failures and pain.

In any case, if the global economy continues to deflate, US, Jap, EU will all be easing and easing with all in negative interest rate zone! China will then be printing more (by devaluing their currency further to match the USD depreciation.

Civil service is also closing its doors. But we are sheltered relatively.

I still have colleagues commenting we are paid peanuts (10k) and people lamenting about bonuses.

I have a friend doing contract work in my school, he is good and effective, but we have many problems getting him back into system as a perm staff. My guess is there is over supply now, compare this to a decade ago where all are welcomed, retired, career switch, resigned ...

I told my Boss and my friend that since the application approval has been delayed twice in a year, I said if he can find a better offer, just go.

My boss said, it's tough, market is bad. I said I know. She was very surprised and ask how do I know. I cannot tell her I invest and keep my pulse on the markets Muhahhaha so I said "I keep myself current"

But surprisingly, I still get high, lucrative offer to give tuition. Too bad I no time ...

imo we have been in eye of the storm since Lehman. QE just made us walk backwards to stay in the eye. The eye is getting smaller as other sectors start getting hit.We have no choice but to walk through the storm, the further we delay the worse the walk.BBC just did story 2 weeks bout the ship park outside spore and Rotterdam. The parked ships are back big time and is good barometer of the world economy in the doldrums.Good luck to our strawberry generation. Rolf the messenger with bad news gets killed so no point saying too much to others.Yes we say cause we see it as opportunity but others only see you as nay sayer.Fortunes are made and lost in times of crisis.

Hehe... I really like your phrase of me the messenger and getting killed. I have a good laugh about it. Tks :-) But frankly, while I m not a stubborn person (contrary to what many may think), I will be really quite strong in my beliefs when my gut, heart, head n everything in my body tells me that I m doing the right thing! So 死而无憾 maybe! lol!!!

Fortunes cannot be destroyed just like energy, it can only be transferred from one party to another.

"Worst ever oil crisis in historyI met many veterans lately. They were in the industry 20, 30 or even 40 years. All lamented that this is the worst ever crisis in their entire career. While the 1980s oil crisis is bad but there isn't as many excess vessels/rigs compared to this one. In my opinion, the main issue is the cheap credit over the past 4-5 years. Since financing is so easy, new building is severely over-supplied and now the biggest bubble ever, much worse than the 2009 crisis.

Therefore even if oil price is to recover, you need many years to absorb the oversupply in these idling vessels before business prosper again."

this reminds me 4~5 years ago, when i had a stint in the samsung shipyard in Busan for a new build. it totally blew my mind when i saw 15 ~20 drillships being built. almost all the major rig builders were there, most of them building not only just one. it was a sight to behold, almost akin a factory production line setup, but a gigantic scale. the way it was run, kinda makes keppel shipyard pale in comparision. back then, new drillship charter rates were 400k-500k/day... and everyone was jumping into the bandwagon

now, thinking back, i lack the foresight to see what this boom of new build would mean down the road. back then, were the golden years, and everyone's judgement was clouded. we all lived in the moment. (we didnt have a Rolf back then. haha) just like the Joseph story, 7years of harvest followed by 7 years of famine.

we all learn and experience, and hopefully come out wiser from it. whatever doesn't kill you, makes you stronger.

No worries about lacking of foresight now! You r not the only one. I enjoyed the boom from 2005-2008 where I see so many ships being speculatively built, then the big GFC gave all the industry 1 year of pain and agony before it rose again. Then the next boom in 2010-2014 and crash in 2015 again till now... (just 7-8 yrs)

I did not see it as early either! Otherwise I will have cash out in 2013 or early 2014. Nope I lost money too!

Frankly learning from own experience is not as easy even, let alone others or book. Many owners/CEO whom I know and was already hit badly in 2009 after huge speculation, but instead of being conservative in the 2010, they continue to place even bigger bets thinking this time is different! These r people I know who owned companies in hundreds of millions with wealth of life and business experiences.

They also make the same mistake. Perhaps its human nature being obscured by greed regardless of how rich, exposed, or experience u r!

Therefore I strongly believe we r still young and should be able to witness another 1-2 "big one" in our life time! Just be patience and never forget this experience. CW8888 mentioned he learnt during AFC, wow... that was almost 2 decades ago!!!

Joseph had a very tough and terrible life before he is enlightened n blessed! Maybe a strong and blessed human need to somehow always go thru woe before they enjoy the weal.

i(speculate) on the 1st day of Brexit. If i do nothing, then i am 5 to 6 k richer now lol.Now only 1 to 2 K.Q.Why did i buy for fundamentals suddenly change to market sentimental speculations?i think i follow the markets too closely lol.Believe it or not! i do it everyday since 1987/88.

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